Publications

	Table of Contents
p. 10 of 19 BACK | NEXT I. Executive Summary II. The Policy Context III. International Efforts to Combat Money Laundering and the Financing of Terrorism A. Financial Action Task Force on Money Laundering and Affiliated Bodies B. The United Nations C. The Bretton Woods Institutions D. ADB’s Activities in AML IV. The Policy V. Implementing the Policy VI. Recommendation

Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of Terrorism : III. International Efforts to Combat Money Laundering and the Financing of Terrorism

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C. The Bretton Woods Institutions

37. IMF and the World Bank have assumed a major role in supporting the efforts of FATF and the UN to combat ML and FT, and have intensified their efforts in recent years.

1. International Monetary Fund

38. In recent years IMF has intensified its efforts to assess and strengthen international financial systems. This has been facilitated in part by the development of the Financial Sector Assessment Program (FSAP) and its Offshore Centre Assessment Program. The latter is a voluntary program that assesses the adherence of OFCs to international financial standards.

39. In April 2001, the Board of IMF discussed the issue of money laundering and ways in which IMF can contribute to related international efforts. It was considered that IMF is well positioned to play an important role in protecting the integrity of the international financial system. Providing support to international efforts to combat money laundering was considered to be one way in which this objective could be achieved. It was decided that IMF should intensify its focus on relevant AML issues, establish a closer working relationship with the major international AML organizations and groups, and include AML concerns in some of its operational activities.

2. World Bank

40. The World Bank has substantially expanded its programs in the areas of anticorruption, governance, and public financial management; and assisted countries in carrying out financial sector reforms focusing on legal, regulatory, and supervisory issues–particularly in the aftermath of the Asian financial crisis. Its financial sector lending and TA activities rapidly increased, through programs to strengthen legal, regulatory, supervisory, and judicial reforms and institutions, corporate governance, accounting and auditing, and market transparency.⁹ It has also focused on financial abuse in its economic and sector work and policy dialogue, and extended TA to member countries to strengthen their AML programs. Finally, it has initiated various measures to tighten its fiduciary safeguards to ensure that its own lending is used for the intended purposes and is not subjected to financial abuse. Under an action plan for AML and CFT approved by its Board in January 2002, the World Bank initiated a number of additional measures including upgrading and expanding staff capacity to respond to client requests for assistance in meeting international AML and CFT standards, linking AML/CFT assistance with country assistance strategies, and building technical capacity among national financial supervisors and other government officials involved in AML/CFT. Among these are knowledge sharing, awareness raising, and information exchange initiatives such as the Global Dialogue Series and AML/CFT conferences held in Moscow and Montevideo.

3. Joint International Monetary Fund and World Bank Initiatives

41. In May 1999, IMF, along with the World Bank, introduced the FSAP providing for joint IMF-World Bank assessments of the financial sectors of their common member countries. This voluntary program was designed to identify strengths, risks, and vulnerabilities in national financial systems and help promote the soundness of such systems. The FSAP assesses, among other things, members' adherence to internationally accepted financial standards, codes, and best practices. Work undertaken in this regard has led to the development of a number of reports on observance of standards and codes focusing on financial sector standards, including those for the banking, insurance, and securities sectors. 42. In 2001, IMF and World Bank staff began working closely in consultation with FATF and other international standard-setting agencies to develop a methodology document that would provide a framework for AML/CFT assessments. The methodology is based largely on the FATF 40 and 8 but also draws on relevant UN Conventions and Security Council Resolutions and international standards established for the banking, insurance, and securities sectors. The text of the methodology document had been discussed for several months and was finally cleared by FATF at its Plenary Meeting in Paris in October 2002. It was subsequently formally endorsed by the Boards of IMF and the World Bank. Consistent with the instructions of these boards that their staff should not become involved in assessing the implementation of the criminal justice system and sectors that are not macroecomically relevant, these aspects of the assessment are undertaken by independent AML/CFT experts that are not paid for or supervised by IMF/World Bank.

43. By November 2002, IMF and the World Bank launched a 12-month pilot program of AML/CFT assessments of the FATF 40 and 8 and accompanying reports on observance of standards and codes to be undertaken in the context of FSAPs and IMF’s OFC assessments. The IMF and World Bank boards also decided to add the FATF 40 and 8 to the list of areas and associated standards and codes that are incorporated into their operational work. The assessments using the new methodology are being coordinated with FATF and FSRBs to reduce duplication of effort.

44. The World Bank and IMF also undertook an initiative to strengthen the coordination of TA for AML and CFT. During April 2002, they hosted a meeting of major contributors and providers of global AML/CFT TA to discuss coordination. The meeting discussed the development of mechanisms to enhance the effectiveness of AML/CFT TA through closer coordination and information exchanges. The two institutions are continuing their efforts in this area with a focus on regional approaches. ¹⁰

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